Struggling Nigerian economy hits biggest brewer’s bottom line

The company says the loss for the period ended 31 December 2023 “reflects the challenging economic environment in Nigeria”, including less spending by consumers as they struggle with high inflation that has eroded their buying power in the tight economy. 

“These severe economic conditions include persistent cash scarcity, removal of fuel subsidies resulting in a notable surge in energy cost, naira devaluation, foreign exchange scarcity, and continued challenged consumer spending,” Hans Essaadi, Managing Director/CEO, said when the results which were released to the Nigerian stock exchange. 

The company’s brands include Legend Extra Stout, Turbo King Dark Ale, Heineken Premium Lager, Star Lager Beer, and Tiger Lager Beer. 

Although there was a 9% growth in revenue, aided by a positive price mix, these positives were undermined by the impact of the devaluation of the naira currency, which caused a major loss on foreign exchange transactions. 

Strategy to reduce business risk 

The company’s strategy to meet the challenges presented by the tough economy is centred around reducing risk to the business by focusing on a positive price mix, efficient sales operations, strong and aggressive cost management, and other efficiency measures. 

“Going into the new [business] year, we are conscious of the continued severe macro-economic challenges – rising inflation, heightening operating costs and pressured consumer spend,” Essaadi said. 

“However, we believe the challenges of 2023 have laid the groundwork for opportunities that would lead to value creation for all our stakeholders.” 

One of these opportunities is the acquisition of an 80% stake in Distell Wines and Spirits Limited, a local business in the wines and spirits category. 

Nigerian Breweries has also secured an exclusive right to import all Heineken Beverages wines, spirits and cider brands from South Africa. This includes a license to market and distribute all the products in Nigeria, as well as to produce any of the imported brands within Nigeria. 

“This acquisition is part of efforts to provide access to a complementary multi-category portfolio of fast-growing wines and spirits brands, and capture significant growth opportunities in the wines and spirits segment of the beverages industry,” he explained.